Private company facts for kids

A privately held company is a special kind of company that isn't traded on a stock exchange. This means you can't just buy or sell its stock (or shares) openly like you can with bigger companies. Often, these companies are owned by a single family or a small group of Shareholders.

Even though many private companies are small, some are actually huge and well-known around the world! Many big public companies that you might know today actually started out as private companies. In countries like the United States, private companies follow different rules for checking their finances (called auditing) compared to public companies. For example, private companies don't have to share as much financial information with the public or with government groups like the U.S. Securities and Exchange Commission (SEC). This can make it a bit harder to find out how much money a private company is making.

What is a Private Company?

A private company is a business that belongs to a few people or a family. Its shares are not sold to the general public on a stock market. Instead, ownership is kept within a small group.

Who Owns Private Companies?

Most private companies are owned by their founders, their families, or a small group of investors. These owners usually have a lot of control over how the company is run. They make decisions without having to worry about what lots of public shareholders might think.

How are Private Companies Different from Public Companies?

The main difference is how their shares are bought and sold.

• Private companies: Their shares are not available on a stock exchange. If you want to buy a part of a private company, you usually have to talk directly to the owners.
• Public companies: Their shares are listed on a stock exchange, like the New York Stock Exchange. Anyone can buy or sell these shares easily.

Why Choose to Stay Private?

Companies might choose to stay private for several reasons:

• More Control: Owners keep full control over their business decisions. They don't have to answer to thousands of shareholders.
• Less Public Pressure: They don't have to share all their financial details with everyone. This means less pressure from the public or competitors.
• Long-Term Focus: Private companies can often focus on long-term goals. Public companies sometimes feel pressure to show quick profits every three months.

Famous Examples of Private Companies

While many private companies are small, some are very large and famous. For example, some well-known brands you might use every day are privately owned. These companies often grow very big without ever selling shares to the public.

Rules for Private Companies

Private companies still have rules they must follow, but they are often simpler than those for public companies.

Financial Reporting

In the United States, private companies don't have to file detailed financial reports with the U.S. Securities and Exchange Commission (SEC). The SEC is a government agency that protects investors. This means it's harder for the public to find out how much money a private company makes or spends.

Auditing Standards

Even though they don't file with the SEC, private companies still need to keep good financial records. They often have their finances checked by independent experts, which is called an audit. However, the rules for these audits can be different and sometimes less strict than for public companies.